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Mall bad news... but some bright spots

In just over a year, clothing retailer Hang Ten has closed more than a third of its stores.

The 12 outlets, in suburban malls, had been bleeding money. Consumers were spending less but Hang Ten's landlords were still charging high rents, said its general manager Andrew Kee.

"We started to close non-profitable suburban shops since Q4 2015 to reduce losses and just concentrate on a few strategic locations."

The days of suburban malls as the retail sector's bright spot are coming to an end, said property consultancies.

For the past five years, as the rise of e-commerce and growing economic uncertainty pushed Orchard Road retailers out of business, suburban malls were fairly resilient.

Such malls could fall back on shoppers living in the area, unlike the tourist-reliant Orchard Road, which is susceptible to competition from overseas destinations and lacklustre tourist arrivals.

But as the challenges drag on, suburban malls are being dealt a belated reality check.

Some mall managers are fighting back by offering short-term leases, filling their spaces with food and beverage outlets, and adding more lifestyle elements to their malls.

According to property research consultancy R'ST Research, rents of retail properties in Orchard Road fell by about 11.1 per cent on average from 2012 to 2015.

Over the same period, rents of suburban retail spaces dipped only marginally at about 1.4 per cent.

The turning point was last year, when the pace of decline of suburban rents quickened - from 1 per cent quarter-on-quarter in the first quarter to 2 per cent in the fourth quarter, said R'ST Research's director Ong Kah Seng.

This is a sign that rents in suburban malls are going downhill, he added.

Tenants are also feeling the heat.

Czech shoe company Bata's country manager Pierluigi Pontecorvo said it is increasingly difficult to operate in suburban malls now, compared with two years ago.

Footfall has reduced "drastically", while little has been done by malls to attract customers, he said, adding that landlords were also not flexible in reducing rental costs to help retailers cope with the challenges.